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Quantile hedging for basket derivatives

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  • Micha{l} Barski

Abstract

The problem of quantile hedging for basket derivatives in the Black-Scholes model with correlation is considered. Explicit formulas for the probability maximizing function and the cost reduction function are derived. Applicability of the results for the widely traded derivatives as digital, quantos, outperformance and spread options is shown.

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  • Micha{l} Barski, 2010. "Quantile hedging for basket derivatives," Papers 1010.5810, arXiv.org, revised Jan 2016.
    • Handle: RePEc:arx:papers:1010.5810
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    Cited by:

    1. Huu Thai Nguyen & Serguei Pergamenchtchikov, 2012. "Approximate hedging problem with transaction costs in stochastic volatility markets," Working Papers hal-00808608, HAL.

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